- by New Deal democrat
In the past year, in contrast to much other data in the jobs sector, the JOLTS reports have been very much consistent with a “soft landing” jobs scenario. In the August report released this morning, the trend weakened slightly.
As a quick refresher, this survey decomposes the employment market into openings, hires, quits, and layoffs. So to begin, here are job openings, hires, and quits all normed to 100 as of just before the pandemic:
I regard openings are “soft” data. While they have trended down for several years, they have remained above their pre-pandemic levels, and are not of much concern to me. They improved slightly this month. The trend for the past 15 months has been flat to slightly downward. Meanwhile both openings and quits declined, the latter to the lowest level since December 2024, but the former came in at the lowest level since June 2015 except for June 2024 and the pandemic lockdown months! These are both “hard” data, and were both weaker readings.
Now let’s look at several components are slight leading indicators for jobless claims, unemployment and wage growth.
Layoffs and discharges, which have trended slightly higher since last summer, but have been rangebound since last autumn, remained so again, although the three month average was the highest in the past 12 months:
This generally accords with both the increase in the unemployment rate in 2023-24, as well as its plateauing this year (red, right scale), as well as the recent trend in continuing jobless claims.:
Next, the quits rate (left scale) typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale):
In August the quits rate declined slightly, tying its lowest in the past 12 months. This suggests that nominal wage growth may decelerate slightly further in the next several months.
Finally, I want to discuss why I don’t pay much attention to the “Beveridge curve,” which is the relationship between job openings divided by the number of unemployed, and the unemployment rate.
In the past several months there has been some modest hysteria about the number of unemployed exceeding the number of job openings (i.e., the ratio has fallen below 1:1), leading to speculation that the unemployment rate will increase.
But the historical view shows that there is no magic ratio of the Beveridge curve which is consistent with rising or falling unemployment. Rather, it is the *trend* in openings vs. the number of unemployed which has generally correlated with the *trend* in the unemployment rate. As shown below, with the Beveridge curve inverted for ease of comparison, the ratio was *always* below 1:1 for the entire period before 2018, and yet there were two extensive recoveries during which the unemployment rate declined:
Now here is the post-pandemic view. Again, we see that the *trends* correlate well, but there is nothing magic about the 1:1 level:
Just like the layoffs and discharges metric, this suggests that the unemployment rate may increase slightly.
In short, this was a weak report. But it was a report for August, and we already have the August jobs report. It tells us very little about what to expect for September (if it is released, given the likelihood of a government shutdown before then), except that possibly the unemployed ent rate may increase.
